🌽 Crop Insurance

How Crop Insurance Works

Crop insurance is a federally backed program administered through private insurance companies. The federal government subsidizes a portion of the premium, making it affordable, but the program itself is complex with many options:

• Revenue Protection (RP) — the most popular plan in South Dakota. It protects against both yield losses and price declines. If your actual revenue (yield × harvest price) falls below your guaranteed revenue, the policy pays the difference.
• Yield Protection (YP) — covers only yield losses, not price changes. Your guarantee is based on your approved yield history times a coverage level you choose (50%–85%).
• Revenue Protection with Harvest Price Exclusion (RP-HPE) — similar to RP but caps the guarantee at the projected price, even if harvest price is higher. Lower premium, less protection.
• Whole-Farm Revenue Protection (WFRP) — covers total farm revenue from all commodities under one policy. Useful for diversified operations.
• Crop-hail insurance — this is private insurance, not federally subsidized. It supplements federal coverage by paying on a per-acre basis for hail damage specifically, with no deductible on most plans.
• Enhanced Coverage Option (ECO) and Supplemental Coverage Option (SCO) — additional federal programs that provide county-level coverage above your individual policy. ECO covers down to 86% of expected revenue; SCO covers the gap between your individual coverage level and 86%.

Common Pitfalls and Complications

Crop insurance is one of the most technically complex insurance products there is. Here's where producers run into trouble:

• Missing deadlines — Federal crop insurance has hard deadlines: sales closing dates, acreage reporting dates, production reporting dates. Miss one and you lose coverage or get penalized — no exceptions. For most South Dakota spring crops, the sales closing date is March 15.
• Not understanding your APH — Your Actual Production History (APH) is the basis of your coverage guarantee. If your records are incomplete, your APH defaults to lower "T-yields" that reduce your guarantee. Keeping accurate production records every year directly affects your coverage.
• Choosing the wrong coverage level — Higher coverage levels (80%–85%) cost more in premium but protect more of your revenue. Going cheap at 65% saves premium dollars but leaves a huge gap before coverage kicks in. The right level depends on your debt load, cash reserves, and risk tolerance.
• Skipping crop-hail — Federal crop insurance covers hail, but with a deductible based on your coverage level. If you're at 75% RP, you absorb the first 25% of loss before the federal policy pays. Crop-hail insurance fills that gap — and in South Dakota, hail is not a matter of "if" but "when."
• Late planting penalties — If you plant after the final planting date, your guarantee gets reduced by 1% per day. In a wet spring, the decision of whether to plant late or take prevented planting has major financial implications — and your agent should be helping you run the numbers.
• Unit structure mistakes — How you structure your units (basic, optional, enterprise) dramatically affects both your premium and your claim potential. Enterprise units are cheaper but average your yields across your whole operation, which can dilute a loss on individual fields.
• Not reporting losses promptly — You're required to notify your agent of a potential loss within 72 hours of discovery. Late notification can complicate or jeopardize a claim.

Crop Insurance in South Dakota

South Dakota is one of the top states in the country for crop insurance participation — and for good reason:

• Hail belt — South Dakota has the highest frequency of crop-damaging hail events in the nation. In some years, hail claims exceed all other peril categories combined. Private crop-hail insurance is essentially standard practice here.
• Drought in the west — West River South Dakota faces recurring drought. Revenue protection at higher coverage levels is critical for operations where one dry year can be the difference between making it and not.
• Wet springs in the east — Eastern South Dakota's heavy soils and flat terrain mean that wet springs regularly delay or prevent planting. Prevented planting coverage and the late-planting decision are annual considerations for many producers.
• Diverse crop mix — Corn and soybeans dominate the east, wheat and sunflowers are common in the north and west, and specialty crops like oats, barley, and forage are scattered throughout. Each crop has its own insurance plan, deadlines, and pricing.
• Grassland and range coverage — Ranchers can insure native pasture and rangeland through the Pasture, Rangeland, and Forage (PRF) program, which pays based on rainfall indices. It's underutilized relative to its value.
• Early frost and freeze — South Dakota's growing season is shorter than many Corn Belt states. An early September frost can devastate late-planted corn that hasn't reached maturity.

Why This Is a Job for an Independent Agent

Here's something most people don't realize about crop insurance: the federal program is sold through private companies, and the premiums are the same regardless of which company you buy from. The policy is identical. What's not identical is the agent.

An independent agent who writes with multiple crop insurance companies can help you choose the carrier with the best claims service in your area. They can also coordinate your federal crop insurance with private crop-hail coverage from a different carrier to get you the best overall program.

More importantly, a good crop insurance agent earns their keep during claims. They help you document losses, work with adjusters, and navigate the federal rules that determine your payout. When you're dealing with a hail-flattened cornfield or a prevented planting situation, the quality of your agent matters enormously.

Helpful Questions to Ask Your Agent

Crop insurance decisions have real dollar consequences. These questions will help you make sure your program is set up right:

• What coverage level makes sense for my operation given my debt load, cash reserves, and risk tolerance?
• Should I be on enterprise units or optional units — what's the actual tradeoff in premium versus claim potential for my acres?
• Do I need private crop-hail insurance to fill the gap above my federal deductible?
• Is my APH accurate, and are there any low-yield years dragging it down that we should look at?
• Walk me through my deadlines — sales closing, acreage reporting, production reporting — so I don't miss one.
• Should I look at SCO or ECO for additional county-level protection on top of my individual policy?
• If we get a wet spring and I can't plant on time, what are my options — late planting versus prevented planting, and how do we decide?